The Collected Works of Author and Blogger Larry Roberts

Archive for August, 2016

While some underwater homeowners were saved by federal reserve policy, the main beneficiaries of this stealth bailout were the banks. The populace was sold on quantitative easing and mortgage interest rate stimulus as a measure to save "Main Street." It was said this money pumped into the economy would create jobs, and the combination of jobs, increased incomes, and low mortgage rates would cause a boom in housing which would elevate loanowners above water. What was sold as a big benefit to Main Street devolved into another massive bailout of the banking industry with few tangible benefits to the people the programs were ostensibly designed to help out. Proponents of these policies can point to the rapid increase in house…[READ MORE]

The housing market sales doldrums we experience today is partly a result of the smaller Generation X hitting their prime homebuying years. Most anticipate a resurgence of housing when Millennials start buying homes in larger numbers. Back in 1997 a demographic study shook the homebuilding industry when it said housing demand would crater and house prices would be depressed because Generation X was so much smaller than the Baby Boomers. As it turned out 1997 was the bottom of the market, and both sales and home prices rose dramatically in a 10-year run that ended with the Great Housing Bubble. So much for demographics. With such dramatic and high-profile misses, it's difficult to put too much weight on a demographic…[READ MORE]

As mortgage rates rise, home sales will decline, and if it goes on long enough, prices will fall. In rocketry, escape velocity is the speed required to propel an object into a stable orbit. In a housing market, escape velocity is a rate of price and sales volume increase necessary to sustain an increase in demand required to push prices higher for the long term. Escape velocity is the elusive dream of real estate pundits, a group who doesn’t understand what it was or why it disappeared (probably forever). In previous real estate cycles (pre Dodd-Frank), as prices went up and buyers were priced out of the market, lenders responded by offering affordability products toxic mortgage financing terms. As affordability…[READ MORE]

Home mortgage interest deduction encourages high wage earners to borrow more; capital gains tax exemption encourages wealthy to invest more in personal homes. The combined effect inflates house prices. Politicians promote home ownership through a variety of subsidies and tax loopholes, ostensibly to promote a sense of community and quell civil unrest, the modern bread and circuses. A 2014 Republican tax reform proposal curtails homeownership subsidies, and the proposal was vigorously opposed by realtors, homebuilders, and lenders who benefit from the subsidies. Supporters of the subsidies generally control the perception of their largess through planted stories in the financial media appealing to homeowners who rely on the subsidy to reduce their tax bills; however, those who want to reduce these subsidies occasionally gain…[READ MORE]

San Bernardino County Housing Market Report: August 2016 Historically, properties in this market sell at a 25.7% discount. Today's discount is 38.0%. This market is 12.3% undervalued. Median home price is $293,400 with a rental parity value of $480,400. This market's discount is $187,000. Monthly payment affordability has been improving over the last 5 month(s). Momentum suggests improving affordability. Resale prices on a $/SF basis increased from $191/SF to $193/SF. Resale prices have been rising for 6 month(s). Over the last 12 months, resale prices rose 7.7% indicating a longer term upward price trend. Median rental rates increased $13 last month from $2,006 to $2,020. The current capitalization rate (rent/price) is 6.6%. Rents have been rising for 12 month(s). Price…[READ MORE]

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